The Central Board of Revenue (CBR) is monitoring sales tax collection on 12 commonly-used consumer products, but it is interesting to note that the revenue collection is not proportionate to the actual consumption in all the major cities.
Sources told Business Recorder on Thursday that the board is likely to conduct desk-audit of manufacturers of air conditioners, refrigerators, deep freezers, electric fans, ice cream, match boxes, motorcycles, syrups and squashes, tea, tissue paper, toilet soap and toothbrush.
The exercise has been initiated on the directive of the tax authorities for proper collection of GST from manufacturers and others involved in the supply chain.
The sources said that the general public is paying sales tax on a number of consumer products. It is the primary responsibility of the manufacturers to deposit the due amount of GST in case the items have been specified in the Third Schedule of the Sales Tax Act, 1990.
Out of the 12 items identified by the CBR, ice cream, syrups and squashes, tea, tissue paper, toilet soap and toothbrush are included in the Third Schedule. In case of the remaining items ie air conditioners, refrigerators, deep freezers, electric fans, match boxes and motor cycles, the manufacturers and the supply chain including distributors etc are responsible to pay sales tax as applicable on each stage of supply.
The sources said that it seemed that the manufacturers are concealing the production data of these goods. Thus, paying less sales tax at the manufacturing stage against their actual production. Keeping in view the seriousness of the situation, the sales tax officials conducted a market survey to collect data on the consumption of major items by the general public. With the help of collectorates of sales tax, the board has been able to identify certain commonly-used items on which consumers pay sales tax but the amount is not deposited in the national kitty.
In this connection, the CBR has established a special monitoring cell in its headquarters, which is equipped with all samples of consumer products, price, value and specification of each home consumption item alongwith the leviable sales tax.
The sources said that the CBR has also issued instructions to the collectors of sales tax for monitoring the GST collection from the consumer items.
According to the instructions, the collectors have been asked to closely monitor the sales tax collection and immediately submit the report on top priority basis.
The sources referred to SRO 543(I)/2006 of June 5, 2006, under which manufacturers of 29 items, including cars, were restricted to submit the monthly data pertaining to production, clearance and stocks to the sales tax department from July 1. Through this notification, the board had made it mandatory for the registered manufacturers of sugar, blended tea, cigarettes, aerated waters, cement, motorcars, buses, jeeps, trucks, light commercial vehicles/light transport vehicles, motorcycles, air conditioners, refrigerators, deep freezers, washing machines, televisions, paper/paper board, chemicals, gases/acids, flakes/detergent, paints/varnishes, natural gas, liquefied petroleum gas, fertiliser, wires/cables, toilet soap, ceramic tiles and caustic soda to file the 'special return'.
These manufacturers have to submit the details pertaining to production, supplies and goods cleared in a month. The data could be used to ascertain their actual production for the calculation of sales tax. The registered manufacturers dealing in these 29 items would be required to submit details of production, clearance and stocks on monthly basis. The information so obtained will help the collectorates to identify trends in various sectors and make realistic revenue estimates. The field formations would compare the data with actual market information and accordingly ascertain and investigate the causes of variations.
After issuance of the SRO, the sources added, some registered manufacturers did file the special returns but many are still reluctant to submit the accurate production data to the concerned authorities.
Giving reasons to include items in the Third Schedule, the sources said that the existing scheme of VAT is such that tax is to be paid on value addition attributed to each stage, starting from manufacturing down to retail sale to the end-consumer. Despite the endeavours made to bring the intermediate linkages in supply chain into the taxation system, a number of dealers, distributors, wholesalers, etc are still out of the tax net, resultantly, the tax chargeable at each stage of value addition is not being recovered. Thus, scope of Third Schedule was extended in last budget by incorporating certain other items, which are sold in packing with printed retail price.